Busy Boards, Entrenched Directors and Corporate Innovation

Brian Bolton () and Jing Zhao
Additional contact information
Brian Bolton: B.I. Moody III College of Business Administration, University of Louisiana at Lafayette, Lafayette, LA 70504, USA
Jing Zhao: School of Business, Portland State University, Portland, OR 97201, USA

IJFS, 2022, vol. 10, issue 4, 1-34

Abstract: We provide a comprehensive study of how different corporate governance mechanisms influence corporate innovation. Using panel data regression analysis across a sample of more than 13,600 firm-years for firms based in the United States between 1996–2010, we find that entrenched boards, though commonly associated with lower firm value, actually generate substantial innovation. We find that busy boards hinder innovation unless they also have interlocking relationships. Conversely, interlocked directors enhance innovation, unless they are busy. Directors who are CEOs or Board Chairs at other companies hinder innovation. Interestingly, despite being significant determinants of firm value in other studies, director experience, independence and ownership are not related to innovation. In order to be innovative, firms should appoint directors to leverage their professional relationships and directors must have a long-term perspective.

Keywords: corporate governance; corporate innovation; boards of directors; busy boards; entrenched directors; agency theory; incentive alignment; financing policy; ownership structure (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-7072/10/4/83/pdf (application/pdf)
https://www.mdpi.com/2227-7072/10/4/83/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijfss:v:10:y:2022:i:4:p:83-:d:920569

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().